July 13, 2015
Mortgage rates didn't move much today, but are slightly higher for most lenders by the afternoon. Rates were noticeably higher in the morning, but most lenders sent out rate sheet improvements after bond markets rallied into mid-day. A "rally" in bond markets means the prices for things like Treasuries and Mortgage-backed securities (the MBS that dicatate mortgage rates) are moving higher. Rising bond prices mean lower rates on rate sheets.
Being unchanged on a day like today is a surprise. The weekend held a big meeting between Greece and its Eurozone creditors. It was billed as the weekend that would decide if Greece remained in the Eurozone. In general, the closer Greece moves to that door, the better it is for rates, and vice versa if deals are being struck. In other words, if Greece makes a deal with creditors that keeps it in the Eurozone and avoids default, mortgage rates in the US would face significant upward pressure.
The fact that this LOOKED like the case earlier in the morning is the reason that rates started out higher. But even then, we could already see that it would be several more days before any substantive developments on the Greece vs EU situation. Essentially, it's punt for at least a few days. This means the volatility potential remains just as high as it had been heading into the weekend.
Loan Originator Perspective
"Rates took another beating today following the news of the Greece deal over the weekend. The take it or leave it ultimatum from the EU is far worse than the deal the Greek citizens voted against last week. With uncertainty that this agreekment gets approved by all parties growing as the day has progressed, many lenders have already repriced for the better as bonds have regained much of today's losses. It is still highly risky to float and only those that can afford to be wrong should continue floating. If you can tolerate the risk, I would look to float overnight. If you cannot tolerate the risk, then look to lock later today to allow time for your lender to reissue new rate sheets with improved pricing." -Victor Burek, Churchill Mortgage
"Bond markets treaded water today, casting a wary eye on Greece as their bailout drama continues. Is it resolved? Subject to change in the blink of an eye? Doomed to failure before it starts? Who knows? At the end of the day, bond charts tell the tale, and for now, it's "risk off" which means rates trending higher. Floating is a bet on more discord, whether it's prudent or not remains to be seen." -Ted Rood, Senior Originator
"Once again the market thinks there may be a deal with Greece. Who knows maybe there really is one this time and maybe we will be revisiting a new bailout deal once again a few months or years from now. One thing is for sure the deal is not yet sealed and until it is the market is going to continue to whipsaw up and down making locking at application the only thing to do." -Manny Gomes, Branch Manager Norcom Mortgage
"Mortgage rates worsened to start the day but markets fought back and at this point, we're basically at the same prices as Friday afternoon. What to do from here, though? There is a ton of uncertainty out there and you should remain prepared for a move in any direction, but for now...We've been trading in a range for approximately 6 weeks, and at this point, we're nearing the high side of the range. For now, I'd consider floating, as long as the range doesn't break higher. Float with caution." -Brent Borcherding, brentborcherding.com
Today's Best-Execution Rates
- 30YR FIXED - 4.125%-4.25%
- FHA/VA - 3.75-4.0
- 15 YEAR FIXED - 3.25%-3.375%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2015 began with a strong move to the lowest rates seen since May 2013. The catalyst was Europe and the introduction of European quantitative easing.
- It's a highly uncertain time for global financial markets. There is much debate over whether or not the global economy is turning a corner, thus justifying a widespread move to higher rates. That's made 2015 significantly more volatile than 2014 for markets. This means lender rate sheets may change appreciably from day to day, and sometimes even several times in the same day.
- Bottom line: European Quantitative Easing helped push global rates to all-time lows in April. Now, the big risk for mortgage rate watchers is that we might have turned a long term corner. That risk is being compounded by speculation about the Federal Reserve raising rates by the end of 2015.
- May and June have amounted to the 2nd major move higher bounce so far this year. Every time this happens, we have to consider the possibility that this will be a big-picture, long-lasting correction. Until such a thing can be ruled out, Locking makes far more sense.
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).